A sub-strategy for the U.S. Sector strategy.

See the main US Sector strategy for a detailed asset description.

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (66.2%) in the period of the last 5 years, the total return, or performance of 66.5% of US Sectors Balanced Sub-strategy is higher, thus better.
- Compared with SPY (36.8%) in the period of the last 3 years, the total return of 25.1% is lower, thus worse.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Using this definition on our asset we see for example:- Looking at the annual performance (CAGR) of 10.7% in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (10.7%)
- Looking at annual performance (CAGR) in of 7.8% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (11%).

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:- Looking at the volatility of 16.6% in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark SPY (19%)
- Compared with SPY (22%) in the period of the last 3 years, the 30 days standard deviation of 19% is lower, thus better.

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Which means for our asset as example:- The downside volatility over 5 years of US Sectors Balanced Sub-strategy is 11.7%, which is smaller, thus better compared to the benchmark SPY (13.9%) in the same period.
- During the last 3 years, the downside volatility is 13.4%, which is smaller, thus better than the value of 16.1% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:- Compared with the benchmark SPY (0.43) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.5 of US Sectors Balanced Sub-strategy is higher, thus better.
- Looking at risk / return profile (Sharpe) in of 0.28 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.39).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Which means for our asset as example:- Looking at the downside risk / excess return profile of 0.71 in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.59)
- Looking at ratio of annual return and downside deviation in of 0.39 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.53).

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Using this definition on our asset we see for example:- Looking at the Ulcer Index of 5.16 in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (5.9 )
- During the last 3 years, the Ulcer Ratio is 6.17 , which is lower, thus better than the value of 6.98 from the benchmark.

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum drop from peak to valley of -29.2 days of US Sectors Balanced Sub-strategy is greater, thus better.
- During the last 3 years, the maximum drop from peak to valley is -29.2 days, which is higher, thus better than the value of -33.7 days from the benchmark.

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:- Looking at the maximum days under water of 142 days in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (187 days)
- Compared with SPY (139 days) in the period of the last 3 years, the maximum days under water of 116 days is lower, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Which means for our asset as example:- Looking at the average time in days below previous high water mark of 36 days in the last 5 years of US Sectors Balanced Sub-strategy, we see it is relatively smaller, thus better in comparison to the benchmark SPY (44 days)
- Compared with SPY (41 days) in the period of the last 3 years, the average days below previous high of 32 days is lower, thus better.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of US Sectors Balanced Sub-strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.